Janus Capital Group Inc (JNS) is a publicly owned asset management holding company. It provides planning advice and services to its clients in matters ranging from retirement and planning for college to tax planning and investment planning. At the end of the second quarter, the company was popular with John W. Rogers’ Ariel Investments, Ken Fisher’s Fisher Asset Management and Philippe Jabre’s Jabre Capital Partners. JNS recently reported quarterly revenue of $197.6M, down from $264M the previous quarter. To get an idea whether JNS is worth the investment right now, we are going to take a closer look at the company and its closest competitors – Fortress Investment Group (FIG), KKR Financial Holdings (KFN) and AllianceBerstein Holding (AB).
First, we will look at the P/E ratio. This metric divides a company’s share price by its earnings per share – the lower the number, the better. P/E ratio indicates how many times its earnings a company is trading at. If the P/E ratio is high, the stock could be overpriced, so the lower the better. Of the companies we looked at, KFN had the lowest forward P/E ratio at 5.05. FIG was next at 6.02, followed by JNS at 11.08 and AB at 11.52.
We used beta as a measure of risk. A beta of 1.0 means that the stock moves with the market. The higher a stock’s beta, generally, the more volatile the stock, and, as a result, the more risky. A lower beta tends to indicate that the stock moves more independently from the market. AB has the lowest beta of the companies we looked at. It has a beta of 1.75. FIG was next at 2.45, followed by JNS at 2.56 and KFN at 2.57.
Next, let’s look at the earnings growth consistency and expectations. Expected growth estimates can be wrong. In fact, they are frequently overstated, but they can be useful when comparing companies or comparing a company’s performance relative to its industry. JNS’s earnings have grown 5.2% over the last five years compared to the industry’s 3.0%. Its earnings are expected to grow by 8.5% over the next five years while the industry’s are expected to grow 13.0%. AB’s earnings shrank -12.7% over the last five years and are expected to grow 6.3% over the next five. FIG’s earnings are expected to grow 32% over the next five years while KFN is expected to grow 12.5%.
HEDGE FUND OWNERSHIP
Stocks that are favored by hedge funds tend to outperform the market by a few percentage points on the average. Of the companies we looked at, JNS was the most popular. Of the 300+ hedge funds we track, 20 had positions in JNS at the end of the second quarter. KFN was next at 9, followed by AB and FIG, which each had 5.
THE BOTTON LINE
We don’t think JNS is the best stock in this group. We like KFN best. We like its low forward P/E ratio, and its conservative earnings growth estimate. The combination means the growth is likely to be at or above its current estimate. Other stocks to consider include Epoch Investment Partners (EPHC) and INTL FCStone Inc (INTL), both of which have strong analyst recommendations.